Two Year High Operating Profit Likely to be Achieved by LG Electronics in the Second Quarter

07/09/2016

Driven by strong contributions from its mainstay home appliances and television set businesses, South Korea's LG Electronics Inc said that its second-quarter operating profit likely reached a two-year high.

The April-June profit was likely 585 billion won ($504 million), compared with the 599 billion won average of 23 analyst estimates in a Thomson Reuters I/B/E/S survey, for the world's second-biggest TV maker by market share, behind compatriot Samsung Electronics Co Ltd, the company said in a regulatory filing.

Since the 610 billion won of the second quarter of 2014, the result would be the highest quarterly profit. However, ahead of final results scheduled for late July, LG Electronics did not offer any additional details.

Driven by sales of premium products and unusually warm weather in certain markets that boosted demand for air conditioners the firm likely saw strong profit from its appliances business, said analysts just ahead of the Friday disclosure.

Additionally the occurrence of major sporting events such as the 2016 UEFA European Championship soccer tournament enhanced the demands for large-sized sets which largely helped the TV division of the company to swing back into profits, the analysts said. They also said that margins were also likely boosted by the weak prices of display panels.

However, as the appliances business enters a seasonally weaker period, some analysts were sceptical about LG Electronics' prospects during the second half of the year. The mobile division likely reported a fifth consecutive operating loss in April-June, analysts said adding that the sales of its G5 smartphones have been disappointing.

"Despite the G5's originality, LG sold only 2.2 million units of the strategic model due to stiff competition," HMC Investment analyst Greg Roh said in a report on Thursday. The report has made an estimate that the mobile division booked a loss of 94 billion won.

"We expect the (mobile division) to remain in the red in 3Q16," Roh said.

Meanwhile another Asian electronic giant Panasonic has said that it expects that it’s the annual sales of automobile-related batteries in three years would be more than doubled driven by strong demand for its lithium-ion batteries from Tesla Motors Inc.

In the business year through March 2019 from 180 billion yen in the year ended March 2016, the firm's annual automobile battery sales to grow to 400 billion yen ($3.98 billion), expects Kenji Tamura, an executive officer in charge of Panasonic's automotive and industrial systems business.

He said that in the last fiscal year, the combined annual sales of automobile batteries and energy storage products to grow to 500 billion yen which would be around 2.5 times the present value, expects the company.

Upon the request of Tesla and to meet strong orders for Tesla's upcoming Model 3 sedan, Panasonic planned to bring forward its $1.6 billion investment in the electric car maker’s $5 billion "Gigafactory" plant in the U.S. state of Nevada, Tamura also said.

Panasonic is the exclusive supplier of batteries for the Model 3, Tesla's first mass-market car.